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Sunday 25.09.2016 | Name days: Rauls, Rodrigo
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Fiscal Discipline Council calls for reforms without increasing deficit

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn general, Latvia’s government complies with fiscal policy conditions; and its goals for the next three years are rather brave. Nevertheless, the Fiscal Discipline Council has found multiple diversions from requirements of the Fiscal Discipline Law in the Stability Programme.

«The council does not support the increase of costs for structural reforms in the country’s healthcare sector at the expense of the state budget. Because of that, the structural balance assessments have to be corrected by EUR 35 million (013% of GDP) for 2017, by EUR 116 million (0.4% of GDP) for 2018 and by EUR 106 million (0.3% of GDP) for 2019,» – said Janis Platais, Chairman of the Fiscal Discipline Council.

The council asks recommendations to be complied with during the development of the medium-term budget in autumn 2016.

On Tuesday, 12 April, the Fiscal Discipline Council published its report in regards to Latvia’s Stability programme for 2016-2019. This report has been sent to the Saeima, Cabinet of Ministers and Finance Ministry.

He council’s overall opinion does not go against the need to introduce structural reforms. «The need for structural reforms is justified by the fact that Latvia’s current economic growth potential is insufficient to allow a convergence to EU’s average level in the nearest foreseeable future,» – comments Morten Hansen, a member of the council. «In order to introduce all the necessary structural reforms, secure sufficient support for investments in infrastructure and enhance the economy’s potential, a strong fiscal position is necessary on top of a brave and clear government strategy,» – he adds.

«Without a doubt, introduction of structural reforms is vital for the development of Latvia’s national economy. Nevertheless, increasing the state debt in order to realize structural reforms is unacceptable even considering the current balanced development of the country’s economy. The council is concerned that the state debt and budget deficit planned for the next couple of years have grown recently in comparison with the original documents. It creates the risk that there may not be sufficient financial reserves for moments of economic decline,» – explains Martins Kazaks, a member of the council.

The Fiscal Discipline Council especially emphasizes the necessity to create fiscal reserves. At the same time, the council points to multiple long-term fiscal risks, including the risk that some residents of working age do not carry out social insurance payments in adequate amounts. The council also mentions the growing demand for services in the country’s healthcare system.

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